Obsolete Soviet-era motors could create a $1.7bn market

01 October, 2006

The outdated electric motors used in many Russian and Ukrainian factories are creating considerable opportunities for replacement sales, says a new report. The market analyst Frost & Sullivan estimates that the Russian motors market could be worth $1,456m by 2012, with the Ukrainian market adding a further $288m.

"A substantial number of Russian and Ukrainian manufacturing companies are currently working with equipment that, in Western Europe or North America, would be considered obsolete," says F&S research manager, Richard Tamworth. "As a result, most suppliers of electric motors to the Russian and Ukrainian markets expect the replacement cycle to intensify in the next few years, as many companies face the problem of not being able to operate if they do not buy new manufacturing systems or, at the very least, new motors to drive their old ones."

However, the report points out that only a few Russian and Ukrainian manufacturers — mainly those connected with the oil trade — have the resources to invest in modernising their facilities. Many lack the capital to update their plant because their sales are low, their production capacities are often severely under-utilised, and their margins are poor.

"Although production companies realise they are using outdated equipment, many of them do not have the budget to renew their production facilities," says Tamworth. "This lack of investment may prove to be one of the biggest setbacks for the Russian and Ukrainian motors markets, and perhaps their economies in general.

"Despite the gradual, if inconsistent, improvement in the economic situation in these countries," he adds, "many manufacturers are still obliged to repair existing equipment and motors and plan to buy new ones only when necessary."